AI Bubble Rollercoaster: Strategist Sees 'Rolling Sequence' of Sectoral Bubbles

Dhaval Joshi, a strategist from Counterpoint at London's BCA Research, is rethinking the concept of AI bubbles. He argues that instead of one giant bubble forming and then popping, there's a 'rolling sequence of bubbles' where investors misjudge which sector will capture AI's value.

Joshi suggests that this rolling pattern has already played out in various sectors, including software-as-a-service (SaaS), silver, and semiconductors. He points to the 'SaaSpocalypse', where SaaS stocks rallied on the promise of AI as a productivity tool before crashing when investors realized AI agents were threatening the subscription model.

Joshi also notes that silver prices spiked due to its perceived value in data centers but then crashed when it became clear there were other good conductors available. Semiconductors rose on limitless pricing power for chipmakers, only to have investors realize those profits are unsustainable and will eventually crash back down to earth.

Joshi disagrees with his former colleague Peter Berezin's view that the market is in an earnings bubble, instead calling it a 'profit margin bubble'. He believes that high margins are not justified by price or P/E ratio but are rather a result of investors misjudging which sector will capture AI's value.